Pilgrim's Pride Hit by High Feed Costs
Based on the actual costs incurred for the first three quarters and current commodity futures markets for the remaining quarter, the company's feed-ingredient costs for fiscal 2008 would be up an estimated $900 million from last fiscal year.
30/07/08 Pilgrim's Pride Corporation has reported a net loss from continuing operations of $48.3 million, or $0.69 per share, on net sales of $2.2 billion for the third fiscal quarter ended June 28, 2008. These results exclude charges of $4.4 million, or $0.06 per share, related to discontinued operations. For the third quarter of fiscal 2007, the company reported a net profit from continuing operations of $63.3 million, or $0.95 per share, on total sales of $2.1 billion.
"Our financial results in the third quarter of fiscal 2008 reflect the significant headwinds facing our company and industry from high feed costs," said Clint Rivers, president and chief executive officer. "We have worked diligently to pass along price increases to our customers to help offset the impact of record-high corn and soybean meal costs. But, like other producers, we simply have not been able to keep pace with the extreme price volatility in the grain markets."
Pilgrim's Pride said its total feed-ingredient costs in the quarter climbed $266 million, or 41 percent, when compared to the same period a year ago. Based on the actual costs incurred for the first three quarters of the fiscal year and current commodity futures markets for the remaining quarter, the company's total feed-ingredient costs for fiscal 2008 would be up an estimated $900 million from last fiscal year.
"Looking ahead, there is no question that high feed costs will continue to be a significant concern for our industry. Pilgrim's Pride is part of a broad-based coalition of food companies that is strongly urging the federal government to fix its badly flawed ethanol policy before the food versus fuel debate sends the global economy into a tailspin and leads to even worse food shortages. Thousands of American workers already have lost their jobs as a result of the crisis facing the meat protein industry. We are pleased by the EPA's announcement last week that it needs additional time to review Texas Gov. Rick Perry's request for a waiver of the Renewable Fuels Standard. It is important for the EPA to understand all of the facts and compelling economic data, which we believe overwhelmingly support a waiver of the fuel standards, so that it can truly make an informed decision."
Mr. Rivers continued: "At Pilgrim's Pride, we are doing everything in our control to manage through this extremely difficult operating environment. Over the past six months we have made some tough, but necessary, decisions to position our company as a stronger, more efficient competitor. Those decisions include: closing a processing plant and seven distribution centers; consolidating our tray-pack business from our El Dorado, Ark., facility into six other case-ready plants; eliminating approximately 1,700 positions; and reducing our chicken production in an effort to better balance supply and demand at appropriate selling prices to cover input costs. In addition, we amended our debt covenants and completed a stock offering for $177 million to provide us with more financial flexibility to manage our business through this tumultuous period. Additionally, while the egg set data trend over the past three weeks has been encouraging, with year-over-year reductions ranging from 2.4 to 3.9 percent over the past three weeks, we believe that these levels of reductions indicate a longer recovery period than we would have hoped for. As such, we believe that high grain costs will continue to exert pressure on our financial results in the fourth quarter of fiscal 2008, resulting in the continuation of operating losses."
For the first nine months of fiscal 2008, Pilgrim's Pride reported a net loss from continuing operations of $193.0 million, or $2.85 per share, on net sales of $6.4 billion compared to a pro forma net loss from continuing operations of $20.4 million, or $0.31 per share, on pro forma net sales of $5.9 billion in the same period last year. The pro forma amounts assume the acquisition of Gold Kist Inc., which closed on December 27, 2006, was completed on September 30, 2006, and included in the operating results for the nine months. The results for the first nine months of fiscal 2008 include a non-recurring income tax charge of approximately $13.0 million, or $0.19 per share, related to an adjustment in deferred taxes as a result of a newly enacted tax law in Mexico, and asset impairment and restructuring charges of approximately $21.1 million, $13.2 million net of tax, or $0.19 per share, related to the closing of one processing plant, one administrative office and six distribution centers. Additionally, these results exclude net losses of $3.5 million, or $0.05 per share, related to discontinued operations. The results for the first nine months of fiscal 2007 include charges of $14.5 million, or $0.14 per share, related to the early extinguishment of debt incurred by the Company in connection with the financing of the Gold Kist acquisition.
